1. Field of the Invention
This invention relates to the field of computer-implemented cost tracking and accounting systems. More particularly, the present invention relates to computer-implemented actual costing and tracking methods and systems that enable independent implementations of actual cost collection accounting methods and actual cost presentation accounting methods.
2. Description of the Related Art
Effective management of large business entities or complex projects requires that the decision-makers be provided with accurate and timely information. Inaccurate and out of date information cannot model the historical or present behavior of the entity with any degree of certainty, nor can such data provide a reliable basis for projections of future performance. Such imperfect information naturally skews the decision making process, and the company's behavior in the marketplace may not be as nimble as it might otherwise have been with more accurate and timely information.
To determine the profitability of a business requires an accurate determination of, among other factors, the cost of doing business. However, the final and total cost of performing a service or manufacturing an item is typically not ascertainable until after the all associated costs have been collected and reported, generally after the service has been performed or the item manufactured. In an attempt to overcome such limitations, a number of assumptions regarding the cost of performing a service or manufacturing an item are generally made, to allow the representation of interim costs until the final cost numbers are available. Over time, such assumptions have evolved into the so-called standard costing method, in which the cost of performing a business activity is estimated a priori. Typically, standard costs are either estimates derived from historical data collected after performing the business activity or they are the system planner's best guess as to the future cost of performing that business activity. The standard cost of performing a business activity, therefore, is generally assigned before the business activity has been undertaken. How well the standard cost assigned to a particular business activity reflects the actual cost of performing that activity is a function of, among other factors, the shrewdness of the guess, the ability of historical data to predict future behavior, the homogeneity of the activity over time, the price stability of needed resources, etc. However, even when standard costs are regularly updated, the variance between the standard cost assigned to the activity and the cost computed from historical data after the activity has been performed can be great. Such variance tends to increase when the time lag between the assignment of the standard cost and the computation of the cost after the activity has been performed is long.
This variance prevents the decision-makers from obtaining accurate and timely information as to the current cost of performing business activities, including the actual cost of labor, resources expended, items manufactured and the like. It is thus in the decision-maker's best interest to reduce this variance as much as possible. However, to do so requires the expenditure of a significant amount of resources. Indeed, to reduce the variance typically requires that the historical data (and thus the standard cost assigned to the item or job) be frequently re-evaluated, at an often-prohibitive expense. Further compounding the problem is that, in today's fluid markets, the prevailing business conditions may change even during the relatively short intervals in which the standard costs are being re-evaluated. These disadvantages of the standard costing and like accounting methods conspire to render impact analysis and recurrence work, for example, impossible, impracticable or too onerous to carry out.
Such problems are not only present at the organizational level, but also exist at lower levels within an enterprise, large company or organization. Indeed, the lack of timely and accurate information is also believed to hinder the effective management of individual departments within an organization, as well as the management of individual projects or contracts within a department or a company.
There has been a long felt need to provide decision-makers with accurate and timely information as to the current cost of performing business activities. There has also been a long felt need to provide real time or near real time actual costing information not only at an organizational level, but also across product or service lines, departments or projects and contracts. Also needed are reliable methods of collecting and presenting actual costing information regarding individual sub-operations within a job or sub-assemblies within a larger manufactured unit, as the operations are performed or the sub-assemblies manufactured.
Another consequence of the pervasive use of standard costing methods is that the choice of the cost collection accounting method drives the choice of the cost presentation accounting method. Indeed, as only approximate costing information is generated by the standard costing method, it is impracticable to present the costs differently than they were collected. For example, if a First In First Out (“FIFO”) cost collection accounting method is used (e.g., in the case wherein it is desired to move old inventory first), then the same FIFO cost presentation accounting method must be used. However, it might be desirable, from a capital gains point of view, for example, to present the same costs using a LIFO cost presentation accounting method, such as when the items or services in question are becoming more expensive as time goes on. As the choice of cost collection accounting method drives the choice of cost presentation method when standard costing methods are used, such decoupling of cost collection and cost presentation accounting methods has not been possible.
What is also needed, therefore, are methods and systems to allow the de-coupling of the cost collection accounting method from the cost presentation accounting method.